Cost Plus vs Fixed Price Contracts: What’s Best For Your Construction Business? (With Stephen Mallinger)

Fixed price contracts work great for cookie-cutter homes and simple builds. But unique architectural projects demand a different approach. 

Award-winning builder Stephen Mellinger shares his proven “cost-plus strategy” that's transformed his high-end residential construction business.

In this detailed episode of The Builders Ladder Podcast, Stephen reveals his exact approach to cost-plus contracts, including: 

• The deposit approach that protects your final payment and maintains a positive cash flow in your building business
• A practical way to structure project management fees 
• The powerful alternative to “variations” that maintains better client relationships
• A transparent invoicing system that builds trust while protecting margins

Stephen also shares critical insights on avoiding legal pitfalls, and why quantity surveyors are essential for million-dollar-plus projects.
 
Key moments:

00:02:15 - Types of projects best suited for cost plus
00:04:35 - Handling admin and project management fees
00:07:55 - How to structure payment claims and frequency
00:13:35 - Managing deposits and final payments
00:15:35 - How to handle margin transparency
00:21:15 - Including contingencies in labour rates
00:31:15 - Avoiding legal pitfalls and misrepresentation
00:33:15 - The importance of quantity surveyor estimates

Whether you're currently handling complex residential projects or considering your first cost-plus contract, this episode provides a practical roadmap for implementation. 

Stephen even shares specific strategies for maintaining margins while building trust with premium clients.

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